Buy the dips in Nifty FMCG, Financials; here's why

According to Ravi Nathani, an independent technical analyst, the 'buy the dips' strategy seems particularly relevant in the current market conditions.

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Ravi Nathani Mumbai

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Nifty FMCG Index: A Strategy of Buying on Dips

The Nifty FMCG Index, currently trading at 51,912.85, presents a unique trading opportunity with a 'buy on dips' strategy.

In this analysis, we will explore the key support and resistance levels, along with an overbought zone, to help traders make informed decisions in the FMCG sector. 

Support Levels: 51,680 / 51,515 / 51,260
Resistance Levels: 52,025 / 52,215 / 52,325. 

Traders focusing on the Nifty FMCG Index should keep a close eye on these support and resistance levels. These price points are critical as they often indicate potential turning points in the market. 

The 'buy on dips' strategy is particularly relevant in the current market conditions. It involves purchasing assets when their prices dip or approach support levels. This approach is based on the expectation that the price will rebound from these levels, potentially creating profitable trading opportunities. 

However, traders should exercise caution, as markets can be unpredictable. It's essential to employ risk management techniques, such as setting stop-loss orders, to protect against unexpected price movements. 

Overbought Zone: 52,636 - 52,736 

Another crucial aspect to consider is the overbought zone, which falls within the range of 52,636 to 52,736. An overbought condition often suggests that the price has risen too quickly and may be due for a correction. Traders should be wary when the index enters this zone, as it may signal a potential reversal or pullback.

In conclusion, the Nifty FMCG Index is currently offering a 'buy on dips' trading strategy. Traders can take advantage of support levels while keeping an eye on potential resistance. Additionally, the overbought zone serves as a valuable indicator for assessing market conditions and potential reversals.

Nifty Financial Index: Range-Bound Scenario

The Nifty Financial Index, currently trading at 19,797.85, finds itself in a near-term range-bound pattern, creating an intriguing setup for traders. In this analysis, we explore the key range levels, potential breakout scenarios, and a recommended trading strategy to help traders navigate this market.

Range-Bound Levels: Upper Range: 19,900
Lower Range: 19,550 

The index is currently confined within this narrow range, indicating a period of consolidation and uncertainty. However, such range-bound conditions can provide valuable insights for traders, especially when considering potential breakout scenarios.

Breakout Scenarios: Breaking the Upper Range (19,900): 

If the index successfully breaches the upper range, it could trigger a sharp reaction on the upside. In this scenario, traders should watch for resistance levels at 20,036, 20,236, 20,390, and 20,475 as potential targets.

Breaking the Lower Range (19,550): Conversely, a breakdown below the lower range may lead to a bearish trend. 

In such cases, traders should consider support levels at 19,136 and 18,715 as potential targets for their trades.

Given the current range-bound conditions, the best trading strategy for cautious traders would be to wait for a clear breakout. Breakouts can provide strong signals about the future direction of the market. Once a breakout occurs, traders can adjust their strategies accordingly, whether it's adopting a bullish or bearish stance. 

However, for those willing to take on higher risk, buying the index at dips near the lower band of the range is an option. In this case, setting a stop-loss order at 19,425 on a closing basis is recommended to manage risk.

Buying near the lower boundary anticipates a potential bounce from support levels. In conclusion, the Nifty Financial Index is currently locked in a narrow range, setting the stage for potential breakouts. Traders should closely monitor the upper and lower range levels and be prepared to adjust their strategies once a breakout occurs.

The recommended approach depends on the trader's risk tolerance, with the more cautious waiting for a clear signal and the risk-takers considering buying at dips with a well-defined stop-loss.

(Ravi Nathani is an independent technical analyst. Views expressed are personal).


First Published: Sep 27 2023 | 06:33 AM IST

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